MPs sceptical over car tax rise

Government plans to increase car tax for "gas-guzzling" vehicles should be bolder to increase the environmental impact, MPs say.

The Environmental Audit Committee's official report backs the move as a "step in the right direction".

But chairman Tim Yeo said the benefit to the environment would be limited, and called for more ambitious changes.

Five members wrote a separate report calling the plan retrospective taxation because it put "a new tax on old cars".

They argued that it should be put on hold until its impact was properly assessed.

'Rise for 43%'

Official estimates say vehicle excise duty will rise for 43% of vehicles made since 2001 - but will fall for 18%.

The changes will increase the number of payment bands from seven to 13, with the maximum tax for vehicles with the most emissions being £455 for 2009/10, while owners of the least polluting will pay zero.

The committee's report, entitled Vehicle Excise Duty as an environmental tax, said the idea was a "step in the right direction" and agreed it was not a retrospective tax.

But it did criticise some aspects of the changes, including the way they were presented in the small print of this year's Budget.

And the cost difference between tax bands was still not enough to make the public buy cleaner models, it argued.

"This is quite an urgent issue - emissions from cars are increasing, people are buying cars all the time," Mr Yeo told BBC One's Breakfast.

"We don't want them to stop driving, but we want them to choose the greenest car.

"They need the biggest possible incentive, that's why the government should be even bolder - really penal rates for high-emission cars and really attractive 'carrots' so that tax is almost nothing on the greenest models."

However, he said that because three out of every four cars bought were second-hand, the tax should apply to old as well as new cars.

Scrapping

The report also said there were concerns over the effect of the change on lower-income households - although it said it was not clear how many would be disadvantaged by these changes.

A "car scrappage" scheme to pay drivers of high emission cars to switch to a more environmentally friendly model was also advocated - an idea welcomed by Friends of the Earth.

The report says that projected savings on carbon emissions were "far less than they could be".

Mr Yeo concluded: "According to the government's own figures, these changes will only have a very limited impact on the environment."

But the minority report, by three Tories and two Lib Dem MPs, condemned the findings of the official report.

It called for the increase to be put on hold until the government had produced a detailed analysis of how the changes would affect those on low incomes, and whether it would make drivers buy greener cars.

Plans should also be introduced to ensure tax bands of second-hand cars were clearly labelled by dealers, and proceeds from the tax should go towards designing more environmentally friendly cars, it said.

Behaviour change

Labour ex-minister Peter Kilfoyle, a strong opponent of the changes, said: "It taxes ownership, it doesn't tax usage - so if you're actually trying to have a really big impact on consumption of oil and all the problems that go with that, you have to look at fuel tax, not road tax.

"The second thing is, there is a retrospective element to this and it means that people who bought cars four, five, six years ago, are now going to be taxed in a way which they never imagined," he told BBC Radio 4's Today programme.

Liberal Democrat MP Jo Swinson, one of the authors of the minority report, said: "The public must have faith that green taxes are not about raising revenue for the Treasury, but in this case, their use is clearly more to do with filling Alistair Darling's coffers than cutting carbon emissions from our roads."

A Treasury spokesperson defended the scheme, saying the new plans would encourage people to use more environmentally friendly cars as well as saving 1.3m tonnes of CO2 by 2020.

"We set out the position very clearly in the Budget. Rates for pre-2001 cars will continue to be based on engine size," he said.

"Taking account of inflation, drivers of these cars will still pay less than in 1997, and some will see a decrease in inflation terms."

Green incentives

The RAC Foundation said it supported the graduated scheme of vehicle excise duty as it "was helping people choose smaller cars".

"Three times more second-hand cars are bought each year than new ones - so upping VED on old polluting vehicles will encourage people to choose greener models, cut fuel bills and lower carbon dioxide emissions," he said.

"Paying people to scrap their old gas-guzzler and replace it with a cleaner car will make this cheaper and easier to do."

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